The Ghanaian government is set to abolish the contentious Electronic Transfer Levy (E-Levy) and Covid-19 Health Recovery Levy while introducing Value Added Tax (VAT) exclusively on fees charged for mobile money transactions, according to sources close to upcoming budget deliberations.
The move, aligning with campaign pledges, aims to streamline the tax regime and ease financial pressures on consumers and businesses.
Under the proposed reforms, mobile money transfers will no longer incur the 1.5% E-Levy, first introduced in 2022 to broaden tax revenue but criticized for stifling digital payment adoption. Instead, a 20% VAT will apply solely to service fees charged by mobile money providers. For instance, a GH¢1,000 transfer currently costs users GH¢20, combining a 1% E-Levy (GH¢10) and a GH¢10 platform fee. Post-reform, only the provider’s fee—say GH¢10—would attract VAT (GH¢2), reducing the total cost to GH¢12. Transactions on platforms like GhanaPay, which waive fees, would incur no taxes, effectively making them free for users.
Betting taxes will also be eliminated, though VAT will apply to operator fees, mirroring the mobile money approach. Officials argue the shift to VAT allows businesses to reclaim input taxes, easing operational costs, while consumers benefit from lower transaction charges. Critics, however, warn of potential revenue shortfalls, though the E-Levy and Covid levy collectively contributed less than 5% of domestic tax income.
The decision underscores a broader strategy to prioritize compliance over coercion. The previous administration’s tax hikes, including the E-Levy, failed to significantly boost revenue and were blamed for encouraging evasion. “These levies contradict equitable taxation principles,” a government insider stated, emphasizing that reducing burdens could foster voluntary compliance and long-term revenue growth.
The Covid-19 levy, introduced in 2021 to fund pandemic recovery, faced backlash for persisting beyond the crisis. Its removal, alongside the E-Levy, signals a pivot toward “rationalized” taxation. Analysts note the return to VAT on financial services—a policy repealed in 2017—reflects lessons from past missteps, with hopes that a fairer structure will stabilize the digital finance ecosystem.
While the reforms promise relief, their success hinges on implementation. The government anticipates higher compliance rates could offset initial revenue dips, though skeptics urge caution. As budget debates unfold, stakeholders await details on enforcement and transitional measures, with outcomes likely to shape Ghana’s fiscal trajectory in the years ahead.